Tag Archives: FASB

Proposed Changes to Pension and Other Post Retirement Benefits Disclosure Requirements

retirementOn January 26, 2016, the Financial Accounting Standards Board issued two new proposed Accounting Standards Updates in an effort to improve the presentation of Pensions and Other Post Retirement Benefits employers provide to their employees. These proposed amendments are aimed at adding more relevant disclosures to the readers/stakeholders of financial statements and eliminating disclosure requirements that readers/stakeholders told the Financial Accounting Standards Board they didn’t consider to be very important.

The proposed Accounting Standards Updated would be applied retrospectively to all periods presented with the exception of having qualitative disclosures for the plan assets  that are measured at net asset value would be only required to beginning with the period at the time of adoption. The effective date and if early adoption will be permitted will be determined once the Board receives feedback from the readers/stakeholders of financial statements regarding the proposed Accounting Standards Update.

Main Provisions in the Proposed Accounting Standards Update (From the Proposed Accounting Standards Update for Topic 715 & Subtopic 715-20 dated January 26, 2016)

Subtopic 715-20: Changes to the Disclosure Requirements for Defined Benefit Plans

Proposed Additions to Disclosure Requirements

  1. A description of the nature of the benefits provided, the employee groups covered, and the type of benefit plan formula.
  2. The weighted-average interest crediting rate for cash balance plans and other plans with a promised interest crediting rate.
  3. Quantitative and qualitative disclosures from Topic 820, Fair Value Measurement, about assets measured at net asset value using a practical expedient.
  4. A narrative description of the reasons for significant gains and losses affecting the benefit obligation or plan assets.
  5. For private companies, not-for-profit organizations, and employee benefit plans, the effects of a one-percentage-point change in assumed health care cost trend rates.

Proposed Removal of Disclosure Requirements

  1. The amount of the pension accumulated benefit obligation.
  2. The aggregate pension accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets.
  3. The amount and timing of plan assets expected to be returned to the organization.
  4. The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
  5. Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts, and significant transactions between the employer or related parties and the plan.
  6. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.
  7. For private companies, not-for-profit organizations, and employee benefit plans, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, private companies, not-for-profit organizations, and employee benefit plans would be required to disclose the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.

Direct Source: http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176167817087

New Nonprofit Accounting Standards Could Have Major Impact

Big changes related to nonprofit accounting are on the horizon. On April 22, 2015, the Financial Accounting Standards Board (FASB) issued proposed ASU, Presentation of Financial Statements of Not-for-Profit Entities. In response to requests for better information about how nonprofits use their resources, the proposed update is intended to add clarity about an organization’s liquidity, financial performance and cash flows, while also improving upon the current net asset classification scheme.

“The proposed ASU contains recommended enhancements to the fundamental reporting model for not-for-profit organizations—a model that has existed for more than 20 years,” stated FASB member Lawrence W. Smith. “We believe that these changes will refresh the model in ways that will make not-for-profit financial statements even more useful to donors, lenders, and other users.”

Many nonprofit organizations and users of financial statements agree that it’s time for an update.

Highlights of the proposed ASU include:

  • Requiring cash flow metrics to help measure financial performance
  • Changes to net asset classifications to include both those ‘with donor restrictions’ and ‘without donor restrictions’
  • Potentially controversial provisions include:
    • Transfers relating to operating measures and funds that have been made available by board action
    • Indirect vs. direct method of cash flow accounting
    • Re-characterization of certain items on the cash flow statement
  • Timing for implementation of the new standard, if approved, is still in question

Aronson LLC’s Nonprofit and Association Industry Services Group is monitoring these changes closely and will provide updates as they become available. In the meantime, if you have any questions about nonprofit accounting standards or other issues, please contact your Aronson advisor or Rob Eby at 301.231.6200.



FASB Proposes Improvements to Not-For-Profit Financial Statements

Big Changes on the Way for Nonprofit Accounting

Update: FASB Proposes Potential Deferral of the Effective Date of New Revenue Recognition Standard

On April 1, 2015, the Financial Accounting Standards Board (FASB) decided to defer the effective date of the new revenue standard, Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606).  This proposed one-year delay is intended to provide entities adequate time to effectively implement the new standard.

The new revenue standard, which was officially issued by the FASB in May 2014, standardizes how companies should recognize revenue in financial statements under US Generally Accepted Accounting Principles (GAAP).

As a result of the proposed deferral, public entities would apply the new revenue standard to annual reporting periods beginning after December 15, 2017 and the first interim period within the year of adoption.  Nonpublic entities would apply the new revenue standard to annual reporting periods beginning after December 15, 2018 and the interim periods within the year of adoption.

Additionally, the FASB decided to allow both public and nonpublic entities to adopt the new revenue recognition standard early, but not before annual periods beginning after December 15, 2016 (which was the original public entity effective date).

The Board directed its staff to prepare an exposure draft which will have a 30-day comment period for the proposed update.

For more information on this update or other accounting standards, please contact your Aronson advisor at 301.231.6200.

Are New Nonprofit Financial Reporting Requirements on the Horizon?

On March 4th, the FASB voted to move forward on a proposal that would change the way universities, charities, foundation and other nonprofit organizations communicate the manner in which they spend and invest funds. The proposed changes would require financial statements to reflect additional transparency regarding liquidity, financial performance and cash flow.

Support for the proposal was not unanimous, with FASB Chairman Russell Golden and Vice Chair James Kroeker voting against the proposed standard in a 5-2 vote. Even among the five board members who voted in favor, two did so with reservations.

Reports the Journal of Accountancy: “FASB Chairman Russell Golden, who cast one of the dissenting votes, said some aspects of the proposal will reduce costs, promote simplification, and provide additional benefits to the not-for-profit community. But he is concerned that the project may increase complexity in the system overall because some of the tentative decisions address conditions only for not-for-profits on issues that also apply outside the not-for-profit sector.”

The proposal will tentatively get an April release with comments due by July 31, 2015. Stay tuned to the Aronson Nonprofit Report for updates to this developing story.

Contact Aronson’s Nonprofit & Association Industry Services Group at 301.231.6200 for more information about this or other financial reporting issues.

FASB Issues New Guidance for Going Concern Determinations


In the nonprofit world, “going concern” refers to an auditor’s opinion or footnote disclosure that describes a scenario where there is substantial doubt about the organization’s ability to continue as a going concern. In other words, the organization’s ability to function for the foreseeable future. This doubt could be the result of a debt default, recurring operating losses, a bankruptcy filing, a negative outcome to a material lawsuit, governmental action threatening the organization’s future, or just simply not being able to pay the bills as they come due. Obviously, it is not ideal for external readers of your financial information to be alerted to such a situation, so decisions about such determinations can be very difficult.

Recent guidance from the FASB further clarifies the extent of management’s obligation to address going-concern situations. FASB ASU No. 2014-15, “Presentation of Financial Statements –Going Concern, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,” codifies for the first time these standards into generally accepted accounting principles (GAAP). Prior to this update, the only responsibility to report going concern issues was placed on auditors of financial statements in AU C Section 570, “The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern.”

This prior guidance put the decision solely on the shoulders of the auditors to make the determination as to whether they would modify their audit opinion to include a statement that substantial doubt exists. The guidance specified that, to make the determination, the look-forward period was one year from the balance sheet date.

The new guidance states that the look-forward period is one year from the financial statement issuance date, so the time horizon for consideration is now longer.  The definition of “substantial doubt” in the new standard also uses a relatively high threshold of probability that the entity will become unable to meet its obligations within the look-forward period. The probability threshold is also thought to be a slightly higher threshold than under current practice.

Audit standard setters will also presumably have to change other audit standards to conform to the new guidance, so stay tuned for more to come on this important development.

If you have any questions regarding a going concern situation or other issues related to financial statements, contact your Aronson advisor or Craig Stevens of Aronson’s Nonprofit & Association Industry Services Group at 301.231.6200.

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